Cross-period Nature Of The Features Of The Board

According to the modern Corporate Governance Structure, "Agency Problem" brought by separation of ownership and management can be theoretically solved by introducing "Board" as an adjustment mechanism. In the other hand, lacking effective external governance environment is the true reality in Chinese markets: no effective M&A markets before stock market reform, defective regulation about protection of small shareholders' benefit, scarcity of well-functioned incentive implements for managers, etc. Under such circumstances, board as core internal governance instrument takes a crucial role and researching on board governance will generate even more profound utility in Chinese markets.How to construct an effective board, however, becomes a tough question to answer. Especially, there is no explicit conclusion about relations between board characteristics and corporate performance. One of reasons for those chaotic empirical analyses is neglecting endogeneity of board. In brief, board characteristics affect corporate performance, and at the same time are affected by corporate performance, historically or currently, and vice versa. Due to the lag feature of capital markets and corporate governance behaviors, this thesis introduces board intertemporal endogeneity model, implicating bidirectional causality between board characteristics and corporate performance.This thesis also empirically examine the existence and applicability of board intertemporal endogeneity model in Chinese markets, using cross-lag regression model based on 2004-2006 penal data of Chinese listed companies. From the result, we know that different measures of corporate performance induce different conclusions. Board intertemporal endogeneity hypotheses can be proofed with Tobin' s Q measuring corporate performance. While using ROE, the story is totally different because ROE as a single accounting index neglects some important things such as company' s future development and market' s attitude to listed companies.Retrospecting all existed corporate governance theories, this thesis introduces board intertemporal endogeneity model, and empirically investigate the existence and applicability in Chinese markets. Theatrically and practically, this thesis will do some useful research on corporate governance in Chinese markets.